26/12/2016 3 Music Industry Predictions That Flopped In 2016

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DEC 24, 2016 @ 06:14 PM 1,501 VIEWS

3 Music Industry
Predictions That
Flopped In 2016
Cherie Hu,  CONTRIBUTOR
I focus on the crossroads of technology and the
music business. FULL BIO 
Opinions expressed by Forbes Contributors are their own.

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Over Tidal Streaming

Daniel Ek, CEO of Swedish music streaming service Spotify,
gestures as he makes a speech at a press conference in Tokyo on
September 29, 2016. Spotify kicked off its services in Japan on
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September 29. (Photo credit: TORU YAMANAKA/AFP/Getty
Images)
   
For such an erratic industry, music
loves its predictions. From pondering the
Grammys to calling the next big hit or the
next technological innovation
roadmap, music business executives,
artists and commentators are eager to
sidestep their own surprises—with mixed
success.

Some predictions for the music industry in

2016 stayed strong. Yes, touring is still a
cash cow. Yes, curation is ever more
important for music discovery, with an
estimated 1 in 5 streams occurring on a
playlist. Yes, streaming services are
aggressively creating original content
(and collaborating with labels in the
process).

Other issues remain more ambiguous,

particularly with regard to emerging
technologies. How many people will
actually cash into virtual reality music
experiences? What impact, if any, will
autonomous vehicles, chatbots and
alternative advertising have on music
companies' bottom lines?

Finally, a handful of industry predictions,

many of which revolved around streaming,
fell flat this year. Here's where we missed,
and why:

1. The industry didn't kill
freemium. In May 2015, rumors began
to spread that Spotify would limit its free,
ad-supported tier to a three-month trial,
facing financial pressures from major
labels and following in the footsteps of
competitors like Apple Music. While the
rumor has since been debunked,
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publications such as Rolling

 
Stone and Hypebot posited that free  
streaming would take its "last breath" in
2016.

In fact, freemium models not only

remain alive and well, but are also
arguably benefiting the music industry at
large. Warner Music Group recently
reported the highest annual revenue
figures in eight years, driven by a 23.1%
increase in streaming dollars—a
significant rise considering that most
users on multi-tier services like Spotify,
Deezer and Pandora still stream for free.

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Perhaps the largest burden lies not on the

artists and labels, but rather on the
freemium services themselves: to date, no
such service has turned a profit.

2. Albums didn't die. Ever since iTunes

launched in 2001, music industry
professionals and commentators alike
have prognosticated the death of the
album. Unbundling otherwise premium-
priced CDs into individual tracks that
could be bought for 99 cents rendered
physical album formats essentially
irrelevant, undermining one of the
industry's key revenue streams at the time.

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Streaming was expected to take this effect

 step
one  further, eliminating altogether  
the need for listeners to "shop" for songs
to purchase, embracing a buffet-style
consumption model instead. Several
electronic artists like Flume and The
Chainsmokers have taken note,
abandoning the traditional album format
for a singles- and EP-oriented approach to
music releases. More regularity allows not
just for more experimentation with
individual works, but also for more
visibility; as radio personality Nic
Harcourt told Billboard, "releasing singles
every month or two keeps them constantly
engaged with their fans."

Yet, 2016 also gave us some of the longest,

boldest albums in recent music history, all
of which became successful because of
streaming, not despite it. Beyoncé's
Lemonade, a Tidal exclusive, featured a
whopping 60 writers and 22
producers. Frank Ocean's Blonde, The
Weeknd's Starboy and Drake's
VIEWS clocked in at 60, 69 and 81
minutes respectively, and each
nailed multiple songs onto the Billboard
Hot 100.

Indeed, in the streaming era, longer

albums not only usher in a new "playlist
aesthetic" catered to digitally-native
listeners, but also make economic sense.
More tracks lead to more streams overall,
which helps performances on the charts.
Some have criticized this strategy for
giving mainstream artists an unfair
economic advantage, working against the
theory that streaming is more beneficial
for artists in the long tail.

3. Hi­res audio didn't catch on. The
past few years have seen a growth in the
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number of high-resolution streaming

 
options from the likes of Tidal and Qobuz,  
offering a lossless listening experience for
$19.99 a month as opposed to the
standard $9.99. In January 2015, Neil
Young famously launched his hi-res Pono
Player, which went on the market for $400
apiece. The assumption was
that audiophiles—the consumer segment
willing to invest hundreds of even
thousands of dollars in high-quality
headphones and audio systems—were a
particularly important type of "superfan,"
and would be willing to jump in masses on
the opportunity to experience lossless
music online.

As of May 2016, however, Tidal has only

around 4.2 million subscribers, dwarfed
by Spotify and Apple Music's subscription
numbers, and likely a small fraction of
these subscribers are paying a premium
for hi-fi. French-orientated Qobuz went
into receivership in late 2015, and has yet
to enter the U.S. market. The Pono Player
is still not a household name, and the
accompanying PonoMusic online store has
been out of commission since July 2016.
Signaling an even more competitive hi-res
streaming market, Young recently
revealed in an interview with Rolling
Stone that he was working with a company
in Singapore to pivot his company from a
hardware player to a streaming service.

Hi-res evangelism has seen a bit more

success in the form of artist and B2B
services. LANDR—a freemium algorithmic
mastering tool that charges anywhere
from $0 a month for two lo-fi Mp3s to $25
a month for unlimited WAV files—syncs
with SoundCloud, while Aftermaster
Audio Labs has a partnership with
independent distributor TuneCore starting
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at $75 per song. The 2017 installment of


 Consumer
the Electronics Show will  
feature the first-ever Hi-Res Audio
Pavilion, featuring product
demonstrations sponsored by the Digital
Entertainment Group, a trade
organization that includes all three major
record labels. The biggest challenge for
these organizations may be to convince the
average music consumer to join their
cause.

To follow more of my thoughts about music,

technology, creativity and business, you can
find me on Twitter and/or sign up for my
newsletter, Water and Music.

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